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Tuesday, May 27, 2014

TaxProf Blog Holiday Weekend Roundup

Monday, May 26, 2014

Ten Life Lessons From Navy SEAL Training

Commencement address by Naval Admiral William H. McRaven (Commander of U.S. Special Operations Command), University of Texas (May 17, 2014) (click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate):

Transcript below the fold:

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May 26, 2014 in Legal Education, Tax | Permalink | Comments (14)

Memorial Day Tax Resources for U.S. Armed Forces (and Their Families, Employers)

IwaContinuing a TaxProf Blog Memorial Day tradition, I want to pass along links to the Tax Information for Members of the U.S. Armed Forces material maintained on the IRS web site:

The tax laws provide some special benefits for active members of the U.S. Armed Forces, including those serving in combat zones. For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard is also included, but not the U.S. Merchant Marine or the American Red Cross. However, these and other support personnel may qualify for certain tax deadline extensions because of their service in a combat zone.

For dozens of links to military tax resources, see below the fold.

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May 26, 2014 in Tax | Permalink | Comments (0)

State Income Tax Revenues Fell in 2014 First Quarter; Ohio (-19%), California (-11%) Among Biggest Revenue Losers

Wall Street Journal, Income Tax Yo-Yo Hits U.S. States:

Many state governments were pulled out of the recession by a surge in tax revenue from their residents' stock-market gains. But that money spigot has slowed, leaving budget holes and debates over the reliance on the wealthy just as many governors face re-election.

While a number of states had forecast lower growth this year in personal income-tax revenue—which is derived in part from capital gains on investments—they failed to project the degree of the decline.

Government figures show that state income tax collections nationwide slipped 0.4% in the first quarter, the first drop since the end of 2009, according to the Nelson A. Rockefeller Institute of Government. But the decline is magnified in some states.

Ohio

-19.3%

North Dakota

-19.1%

Maine

-15.3%

California

-11.1%

North Carolina

-9.2%

Iowa

-4.1%

Mississippi

-3.7%

South Carolina

-3.7%

Virginia

-1.1%

Kansas

-0.1%

A Federal Reserve Bank of Chicago study found that over the last decade, state revenues have become increasingly sensitive to the economy, with tax revenue from residents' investment returns a key reason. There are indications the increased volatility is here to stay, said Richard Mattoon, an economist at the Chicago Fed and one of the authors of the 2012 report [State Tax Revenues over the Business Cycle: Patterns and Policy Responses].

May 26, 2014 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 382

Sunday, May 25, 2014

Charleston Law School Founders Withdrew $25 Million in Profits, Leaving School in Precarious Financial Condition

Charleston LogoFollowing up on my prior posts (links below):  Charleston Post and Courier, Charleston School of Law Founders Withdrew $25 Million in Profits Leaving School on Shaky Financial Ground:

Five respected judges and lawyers started the Charleston School of Law a decade ago with the lofty goal of training attorneys committed to public service.

But beginning in 2010, the well-connected founders and owners with deep South Carolina roots began draining money from the school, withdrawing $25 million in profits by 2013 that they split among themselves.

The owners had a great deal of support from the Charleston community to launch the school, including a below-market-rate land deal from the city aimed at helping it remain on the peninsula and earn accreditation from the ABA.

Their taking out the profits instead of re-investing in the school has left it in such financial shambles its future remains uncertain.

Kevin Hall, a Columbia lawyer who represents InfiLaw System, a company trying to purchase the school, revealed the surprising financial information about founders Robert Carr, George Kosko, Ralph McCullough, Alex Sanders and Ed Westbrook at a public hearing last week. "The Charleston School of Law, ladies and gentlemen, is in a financial tailspin," Hall said.

Carr, Kosko and Westbrook, the three remaining owners, confirmed Hall's description of the school's financial situation, and they all agreed that it got that way because owners for years had been pulling profits from the institution.

Charleston's tuition is $37,874 per year.  89% of Charleston's Class of 2013 took out student loans, in an average amount of $146,766 (the 14th highest amount among all law schools).  53.3% of Charleston's Class of 2013 secured full-time, long-term, bar passage required jobs (compared to the 57.0% national average).

Prior TaxProf Blog posts:

Update:

May 25, 2014 in Legal Education | Permalink | Comments (7)

Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [281 Downloads]  The New Flat Tax: A Modest Proposal for a Constitutionally Apportioned Wealth Tax, by John Thomas Plecnik (Cleveland State)
  2. [262 Downloads]  Just Say No: Corporate Taxation and Corporate Social Responsibility, by Reuven S. Avi-Yonah (Michigan)
  3. [207 Downloads]   It's Time for the Supreme Court to Address the Economic Substance Doctrine, by Andy Grewal (Iowa)
  4. [176 Downloads]  The Real Problem with Carried Interests, by Heather M. Field (UC-Hastings)
  5. [175 Downloads]  Carried Interest for the Common Man, by Richard Winchester (Thomas Jefferson)

May 25, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Indiana Tech Law School Dean Resigns After Enrolling Inaugural Class of 28 Students

Indy Tech (2014)Following up on my previous posts (links below):  Fort Wayne Gazette, Indiana Tech’s Law Dean Leaves; Professor Fills In:

Less than a year after opening its doors, Indiana Tech’s law school lost its dean.

On Friday afternoon, Indiana Tech announced that law school Dean Peter Alexander, also a vice president at the university, stepped down Wednesday. In a news release, Alexander said he achieved the goals he had established for the law school and had a desire to pursue other employment opportunities.

The law school opened in September [with 28 students]. ...

Indiana Tech announced andré douglas pond cummings, who does not use capital letters in his name, will serve as the interim dean at the school. Cummings is the associate dean for academic affairs and a professor of law at the fledgling law school.

Indiana Lawyer, Indiana Tech Begins ABA Accreditation Proccess:

After opening its doors and accepting its first class of students in August, Indiana Tech Law School has begun the process of applying for accreditation, a critical step that could determine whether the institution will be able to continue to attract and accept students. ...

Indiana Tech Law School sent a letter in March notifying the ABA of its intent to seek accreditation and will submit a self-study in August which will explain what the school is about, where it wants to go and what challenges it faces. If the school does well it could have provisional approval by the end of the spring 2015 semester.

Update

Prior TaxProf Blog coverage:

May 25, 2014 in Legal Education, Tax | Permalink | Comments (4)

The IRS Scandal, Day 381

Saturday, May 24, 2014

Financial Times: Data Errors Undermine Piketty's Increasing Inequality Claims

CapitalFollowing up on my previous posts on the new book by Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

Financial Times, Piketty Findings Undercut by Errors:

Thomas Piketty’s book, Capital in the Twenty-First Century, has been the publishing sensation of the year. Its thesis of rising inequality tapped into the zeitgeist and electrified the post-financial crisis public policy debate. 

But, according to a Financial Times investigation, the rock-star French economist appears to have got his sums wrong.

The data underpinning Professor Piketty’s 577-page tome, which has dominated best-seller lists in recent weeks, contain a series of errors that skew his findings. The FT found mistakes and unexplained entries in his spreadsheets, similar to those which last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff.

The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war. The investigation undercuts this claim, indicating there is little evidence in Prof Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.

Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.

For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.

Financial Times, Piketty Response to FT Data Concerns:

Let me first say that the reason why I put all excel files on line, including all the detailed excel formulas about data constructions and adjustments, is precisely because I want to promote an open and transparent debate about these important and sensitive measurement issues (if there was anything to hide, any “fat finger problem”, why would I put everything on line?).

Let me also say that I certainly agree that available data sources on wealth are much less systematic than for income. In fact, one of the main reasons why I am in favor of wealth taxation and automatic exchange of bank information is that this would be a way to develop more financial transparency and more reliable sources of information on wealth dynamics (even if the tax was charged at very low rates, which you might agree with).

For the time being, we have to do with what we have, that is, a very diverse and heterogeneous set of data sources on wealth: historical inheritance declarations and estate tax statistics, scarce property and wealth tax data, and household surveys with self-reported data on wealth (with typically a lot of under-reporting at the top). As I make clear in the book, in the on-line appendix, and in the many technical papers I have published on this topic, one needs to make a number of adjustments to the raw data sources so as to make them more homogenous over time and across countries. I have tried in the context of this book to make the most justified choices and arbitrages about data sources and adjustments. I have no doubt that my historical data series can be improved and will be improved in the future (this is why I put everything on line).

Pejman Yousefzadeh, Facts Are Stubborn Things . . . As Thomas Piketty Is Beginning to Find Out:

The charges are devastating, and there is plenty to back them up. And again, let’s be abundantly clear: The Financial Times is accusing Thomas Piketty of dishonesty, of making up his arguments, of actively trying to mislead readers and actively trying to mischaracterize inequality trends. This mischaracterization leads to policy prescriptions on Piketty’s part that are both entirely unrealistic in their design and implementation, and, more importantly, are wholly unsupported by the actual data on inequality. The main thrust of Thomas Piketty’s book is entirely undermined, and his arguments and conclusions are annihilated. It is hard to imagine a more comprehensive refutation.

Having established that Piketty’s conclusions are shredded and unbelievable, it is important now to note two things. The first is that the Financial Times–and Chris Giles and Ferdinando Giugliano in particular–deserve kudos for the scholarship and for shining a light on Piketty’s mistakes and dishonesty. For those who are wondering how journalism ought to be done, look no further than the example set down by Giles, Giugliano and the Financial Times in general. They have truly done excellent work. Would that more media outlets followed the example that Giles, Giugliano and the Financial Times have set.

The second thing we ought to note is that neither Giles, nor Giugliano, nor the Financial Times would have discovered that Piketty’s books is fundamentally flawed if they listened to Paul Krugman, who famously said on his blog that “if you think you’ve found an obvious hole, empirical or logical, in Piketty, you’re very probably wrong. He’s done his homework!” Yes, that was a real statement by Paul Krugman, and yes, it ought to haunt him for the rest of his life–and beyond. We now know that it is more accurate to say that Piketty fudged his homework.

New York Times, A New Critique of Piketty Has Its Own Shortcomings, by Justin Wolters:

I drew the following five conclusions from The Financial Times’s re-analysis:

  1. Not all differences are errors
  2. They essentially agree
  3. Not all differences are equally important
  4. The F.T.'s bottom line is muddier than it looks
  5. This is a debate about wealth inequality, not income inequality.

Of course, one can’t help but be reminded of the kerfuffle about an earlier research paper written by Carmen Reinhart and Ken Rogoff. I fear the similarities are deeper than most realize, with partisans already engaged in gaining political mileage out of sloganeering about fairly inconsequential spreadsheet errors, rather than digging more deeply into what the data actually say. The difference is that this time the political football is an empirical result that is an article of faith among liberals, rather than conservatives. Beyond that, though, it’s different mudslingers, but similar mud.

The Financial Times analysis is definitely provocative. While it raises important questions, I’m not convinced it does more than that. Mr. Piketty has already written a fairly general response to The F.T.'s analysis, but he has yet to respond to the specific charges made. One hopes that in time Mr. Piketty will write a longer and more detailed point-by-point reply, admitting errors where they exist, and defending his data choices where they are defensible.

And perhaps some good will come from all this. The clearest effect of Mr. Piketty’s efforts is that he has brought new attention to the distribution of wealth. I believe that interest will continue to improve and refine our understanding of the evolution of wealth inequality.

New York Times, Is Piketty All Wrong?, by Paul Krugman:

[I]s it possible that Piketty’s whole thesis of rising wealth inequality is wrong? Giles argues that it is:

The exact level of European inequality in the last fifty years is impossible to determine, as it depends on the sources one uses. However, whichever level one picks, the lines in red in the graph show that – unlike what Prof. Piketty claims – wealth concentration among the richest people has been pretty stable for 50 years in both Europe and the US.

There is no obvious upward trend. The conclusions of Capital in the 21st century do not appear to be backed by the book’s own sources.

OK, that can’t be right — and the fact that Giles reaches that conclusion is a strong indicator that he himself is doing something wrong. ...

The point is that Giles is proving too much; if his attempted reworking of Piketty leads to the conclusion that nothing has happened to wealth inequality, what that really shows is that he’s doing something wrong.

None of this absolves Piketty from the need to respond to each of the individual questions. But anyone imagining that the whole notion of rising wealth inequality has been refuted is almost surely going to be disappointed.

May 24, 2014 in Book Club, Tax | Permalink | Comments (3)

Tenured Wisconsin Prof Sues Former Student Over Online Comments on Her Teaching

Inside Higher Ed, Rating or Defaming?:

Many professors dislike instructor review websites, saying they attract disgruntled students in particular and thus offer a skewed – but very public – account of their teaching abilities. Others say students aren’t always the best judges of teaching ability, and that they tend to rate easier courses and professors more highly than meaningful but challenging ones. But most professors now see being rated on the Internet – good or bad – as an inevitable part of the job.

SVBSally Vogl-Bauer, a tenured professor of communications at the University of Wisconsin at Whitewater, doesn’t dispute that students retain the right to exchange opinions about professors online. But in a civil suit filed in a Wisconsin circuit court, she says that a former student’s extensive online commentary about her teaching amounts to defamation -- not protected speech. She says the student, after being dismissed from the university, “engaged in an intentional, malicious and unprivileged campaign” throughout 2013 to besmirch her reputation. She says it resulted in “substantial economic, reputational and emotional injuries,” and she’s seeking an unspecified amount in damages.

The case raises questions about the line between rating and defaming one’s professor, and of what, if any, ethical and legal obligations students have in publicly assessing professors’ performance.

The suit says Llewellyn made similar, allegedly false statements in a letter to a professional organization, the Eastern Communication Association. The letter also says Vogl-Bauer told the student that men are “sexist,” and that she “screamed” and “lashed out” at him, and accused him of plagiarism. Llewellyn in the letter allegedly says that Vogl-Bauer engaged in “unjust and unethical teaching practices” and that she acknowledged all of those behaviors and apologized for them. Llewellyn also allegedly sent an email to Vogl-Bauer’s department colleagues containing similar comments.

Vogl-Bauer did not respond to a request for comment. Her lawyer, Timonthy Edwards, who is also an adjunct professor of law at the University of Wisconsin Law School, in Madison, said his client’s case was not about whether or not students can rate their professors online. “I’ve taught at the law school for 15 years, and both [Vogl-Bauer] and I get student evaluations every year,” Edwards said. “We would never suggest that that right should be taken away from anyone who has criticism for an instructor. But this is completely different.” Edwards continued: “When somebody goes onto the Internet because they’ve gotten a bad grade or result they don’t like, and anonymously posts things to get even or secure revenge, and they do it over and over again intentionally, that’s not protected speech. You can’t do that, no matter who you are or where you are.”

In the suit, Vogl-Bauer alleges that her former master’s-degree student, Anthony Llewellyn, defamed her on various teaching review and other web sites, including blogs and YouTube. She says he lied in saying that she “degraded,” and “verbally attacked” him. He also allegedly lied by saying that Vogl-Bauer called him a “horrible student,” deducted points from his grade, and was responsible for his being dismissed by the university.

Jonathan Turley (George Washington), Wisconsin Professor Sues Former Student Over Bad Evaluations Posted on the Internet:

The question will come down to what is demonstrably untrue and what is merely an opinion. The case reminds one of Mr. Chow of New York v. Ste. Jour Azur, 759 F.2d 219, (2d Cir. 1985), where a Chinese restaurant sued a food critic for a negative review. ...[The Second Circuit] found that the statements were protected as “opinion.”

Simple Justice, Sensitive Sally Smacks Special Snowflake Student Silly:

It may be that some of Llewellyn’s factual, as opposed to opinion, assertions aren’t true, though it’s likely impossible for Vogl-Bauer to prove.  So a student and professor had discussions, which he says were mean and degrading and she says were kind and wonderful.  What else is new? Absent some magical ability to prove the statements defamatory, Vogl-Bauer’s suit is dead in the water.

Yet, the fact of a professor suing a former student who thought she was the most awful professor ever is where this devolves to besmirch her reputation far more than this student possibly could.  His vendetta comes off as nothing more than a vendetta. His communications appear infantile and ridiculous; another butthurt kid lashing out.  This is the stuff you laugh off, not sue over.

And the fact that Llewellyn went to such extremes to pursue his hate on Vogl-Bauer isn’t a reason to sue a student, but a reason to get him therapy.  This is the conduct of an internet nutjob, that crazed person sitting up all night in a dark room trying to think up new and bizarre ways to attack the person shooting gamma rays at his brain.  You pity someone like this. You don’t sue him.

But now that Sally Vogl-Bauer has chosen the road to the courthouse, a new level of crazy has been breached.  Students sue professors and schools. Professors sue students who LIE, LIE, LIE about them in their public assessments.  Today, it’s crazed talk on the internet, because everyone knows that if it’s on the internet, it must be true.  Tomorrow, it’s the student assessment handouts at the end of class and a whisper campaign to the incoming frosh.

And if Vogl-Bauer’s reputation was so easily besmirched by one student’s vendetta, she might be better advised to work on her rep.

That students have devolved from buddy scholars and statesmen to butthurt babies is, sadly, a trend that’s been happening for quite a while now, as higher ed has facilitated, if not encouraged, them to elevate their feelings above all else. But why is there no grown up in the room?  If it’s “fair” that academics retaliate by suit against students for butthurt of their own, then cries of academic freedom will be replaced by screams to “lawyer up.”

The insanity has to stop somewhere, and it would seem that telling the babies to suck it up is too little, too late. But any professor who thinks suing a student is going to vindicate her academic reputation has lost already.  Stop the madness. Grow up. Everyone.

May 24, 2014 in Legal Education | Permalink | Comments (0)

Ex-BigLaw Partner Pleads Guilty in Tax Case; He Can’t Remember When He Stopped Filing Returns

ABA Journal, Ex-BigLaw Partner Pleads Guilty in Tax Case; He Can’t Remember When He Stopped Filing Returns:

A former partner at McDermott Will & Emery in Miami has pleaded guilty to three counts of failing to file a tax return based on allegations he failed to report more than $8.2 million in partnership profits.

Steven Siff, 56, of Davie, pleaded guilty on Thursday. ... He was accused of failing to report the profits between 2001 and 2011, though Siff told the judge he couldn’t remember exactly when he stopped filing returns. ... Siff has agreed to pay more than $900,000 in restitution. He also faces a possible fine of $300,000 and a possible sentence of three years in prison.

May 24, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 380

IRS Logo 2House Committee on Oversight & Government Reform, Testimony: In 2010, Justice Department Sought Lois Lerner’s Help to Prosecute Tax Exempt Groups Engaging in Politics:

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., and Subcommittee on Economic Growth, Job Creation and Regulatory Affairs Chairman Jim Jordan, R-Ohio, today requested that the Department of Justice make DOJ Public Integrity Section Chief Jack Smith available for a transcribed interview. The request comes after Smith’s subordinate, Director of DOJ’s Election Crimes Branch, Richard Pilger, told Committee investigators in a transcribed interview that the Justice Department met with Lois Lerner in October 2010, two and a half years earlier than previously known, to discuss potential criminal enforcement relating to political speech of nonprofit groups in the wake of the Supreme Court’s Citizens United decision.

“The Committee’s transcribed interview of Richard Pilger presents further troubling information about the Department’s contemplated prosecution of nonprofit groups for false statements,” Chairman Issa and Chairman Jordan state in the letter.  “It is apparent that the Department’s leadership, including Public Integrity Section Chief Jack Smith, was closely involved in engaging with the IRS in wake of Citizens United and political pressure from prominent Democrats to address perceived problems with the decision.”

“According to Mr. Pilger,” the letter continues, “the Justice Department convened a meeting with former IRS official Lois Lerner in October 2010 to discuss how the IRS could assist in the criminal enforcement of campaign-finance laws against politically active nonprofits.  This meeting was arranged at the direction of Public Integrity Section Chief Jack Smith.”

The meeting occurred days before Lois Lerner spoke at a Duke University event about the immense political pressure on the IRS to “fix the problem” created by Citizens United before the 2010 midterm election.

Earlier this week, Chairman Issa issued a subpoena after Pilger declined to answer critical questions on the instructions of a Justice Department lawyer during a transcribed interview on May 6, 2014.  The subpoena followed an April 23, 2014 letter from 17 Members of the Committee requesting materials concerning the Department’s involvement in efforts to scrutinize tax-exempt applicants after emails surfaced between Pilger and the Internal Revenue Service’s Lois Lerner where they discussed singling out and prosecuting tax-exempt applicants, at the urging of a Democratic Senator.

Letter embedded below.

Continue reading

May 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, May 23, 2014

Weekly Tax Roundup

 Weekly Roundup

May 23, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

May 23, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

May 23, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Cronyism Blamed for Half of Univ. of Texas Law School Grads’ Inability to Pass the Bar, Many With LSAT Scores Below 150

Raw Story:  Cronyism Blamed for Half of Univ. of Texas Law School Grads’ Inability to Pass the Bar:

Texas 2A mushrooming scandal at the University of Texas has exposed rampant favoritism in the admissions process of its nationally-respected School of Law.

According to Watchdog.org, Democratic and Republican elected officials stand accused of calling in favors and using their clout to obtain admission to the law school for less-than-qualified but well-connected applicants.

The prestigious program boasts a meager 59 percent of recent graduates who were able to pass the Texas bar exam. Those numbers rank UT “dead last among Texas’ nine law schools despite it being by far the most highly regarded school of the nine,” wrote Erik Telford at FoxNews.com.

“Every law school — even Harvard and Yale — turns out the occasional disappointing alum who cannot pass the bar,” said Telford. “In Texas, however, a disturbing number of these failed graduates are directly connected to the politicians who oversee the university’s source of funding.

Feb. 2014 Texas Bar (1st Time Takers)

Rank

School

Number

Pass Rate

1

Texas Tech

24

91.7%

2

Baylor

37

89.2%

3

Texas A&M

48

87.5%

4

Houston

32

84.4%

5

South Texas

111

83.8%

6

SMU

25

72.0%

7

St. Mary’s

42

66.7%

8

Texas Southern

24

66.7%

9

Texas

17

58.8%

Watchdog.org, Who Got the 128? UT Law Admits Students With Bad LSAT Scores:

Dozens of students admitted to UT Law in recent years have scores on the Law School Admissions Test, or LSAT, that are below the standards of the lowest ranked law schools in the country, a Watchdog.org investigation into admissions favoritism has found.

The LSAT is scored on a scale of 120-180. UT Law students get a median score of 167, according to the 2014 US News survey, and the great majority of the class scores a 160 or better. 

Even a score in the 170s with a near-perfect grade point average is no guarantee of admission, as this roster of self-reported scores for UT applicants from lawschoolnumbers.com makes clear. ...

With a score below 150, you’re something of a longshot even at the lowest ranked law schools in the country. The University of La Verne College of Law in California, for example, came in dead last in the peer reputation survey on the 2013 US News rankings of accredited law schools, yet three-quarters of its students scored a 150 or better.

In recent years, UT Law has admitted students not just with LSATs in the 140s, but with scores as low as 138, 137, 136, even 128. Several of them were rejected by other Texas law schools of lesser reputation. A 128 is down at the very bottom 1 percent of test-takers nationwide. It means the person got less than a quarter of the answers correct. 

Watchdog.org requested the LSAT scores of 122 UT Law students from four other public law schools in Texas, figuring that most people apply to more than one law school. We obtained scores for 47 people from the other schools, almost all of them with names redacted. Only six of the 47 scores were above 160.

The average high score for the applicants on our lists was 149.7, which is barely good enough for the worst law schools in the country. Even schools like Whittier Law College and Golden Gate University School of Law, which put less than a fifth of their graduates into full-time jobs, expect most of their class to have scores above 150.

A few commenters attacked Watchdog.org’s recent report on the political connections of dozens of students who had failed the bar exam at least twice in recent years, on the grounds that bar failure didn’t prove that the student had poor LSAT scores. The argument, in other words, is that just because somebody failed the bar (twice) doesn’t mean he didn’t deserve his place at UT.

These LSAT scores, however, prove just that. Almost every score we got was somewhere between borderline and horrendous. There were 18-24 scores below 150 and five to six scores below 140. ...

The 122 names we requested came from a database we built to tally the number of times UT Law grads had failed the bar. We requested the LSAT scores of the 90 Longhorns who failed the bar two or more times from 2006-2013. We figured that their struggles to pass the bar — 42 of them never passed — made them the most likely candidates to have benefited from favoritism. We requested the scores of 26 others who passed the bar on a second try, who also either shared a last name with a lawmaker or who had already attained a high-level government job.Then we picked six current UT Law students, five for no reason other than to obscure our interest in the sixth: Jonathan Seliger, son of state Sen. Kel Seliger, who is chairman of the Higher Education Committee. ...

We provide all three lists here (Texas Tech, Texas A&M, TSU) for any additional analysis and comments from readers. ...

Although it’s impossible to say conclusively from this sample whether affirmative action is a factor, as opposed to favoritism to a politician or a donor to UT’s Law School Foundation, we can say that the demographics of our list roughly reflect the state’s demographics.

Update:  Of course, there are far fewer first-time takers of the February bar exam (360 in 2014) than of the July bar exam (1,759 in 2013).  Here are the comparable data for the July 2013 bar exam:

July 2013 Texas Bar (1st Time Takers)

Rank

School

Number

Pass Rate

1

Baylor

121

97.5%

2

Texas

268

95.5%

3

SMU

214

91.6%

4

South Texas

263

89.4%

5

Houston

217

88.0%

6

Texas Tech

192

86.0%

7

Texas A&M

127

85.8%

8

St. Mary’s

227

82.8%

9

Texas Southern

130

79.2%

May 23, 2014 in Legal Education | Permalink | Comments (8)

Alm & Soled: Improving Tax Basis Reporting For Passthrough Entities

Tax Analysys Logo (2013)James Alm (Tulane) & Jay Soled (Rutgers), Improving Tax Basis Reporting For Passthrough Entities, 143 Tax Notes 809 (May 19, 2014) :

Tax basis reporting is a notoriously complex enterprise, and taxpayer compliance is lackluster at best. One area of the law in which basis reporting remains absent is for passthrough entity investments, such as partnerships and S corporations. As a result, many taxpayers do not know the basis they have in their passthrough investments. These taxpayers must therefore estimate the tax basis they have in those investments, often producing inflated basis figures and, as a byproduct, smaller taxable gains and larger taxable losses. In light of its proven track record in the area of marketable securities (where third-party tax basis reporting has recently become mandatory), Congress should make third-party tax basis reporting for passthrough entities a similar reality. Mandating passthrough entity basis reporting would greatly simplify the compliance process, alleviate the IRS's burdensome task of trying to detect basis misreporting, and produce billions of dollars in revenue without raising taxes.

May 23, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Georgetown Law Alum Settles Lawsuit Seeking Return of $7.5 Million Donation Over Naming Rights Dispute Following Insider Trading Conviction

Georgetown Law Logo (2013)Following up on my previous post:  National Law Journal, Georgetown Law Alum Settles Donation Spat:

A multimillion-dollar donor to Georgetown University dropped his lawsuit against the school this week.

Scott Ginsburg, who graduated from Georgetown University Law Center in 1978, gave millions to the school. He sued last year to get the money back, accusing Georgetown of violating an agreement to name a building after him. Georgetown said Ginsburg agreed to give up the naming rights after he was found civilly liable for insider trading. The law school filed a counterclaim for $9 million it said he still owed.

Lawyers for Ginsburg and Georgetown filed papers on May 19 in the U.S. District Court for the District of Columbia alerting the judge that both sides had agreed to drop their claims. The notice didn’t include any other details and the parties were mum on the settlement terms.

Ginsburg’s attorney, Graeme Bush of Zuckerman Spaeder, said in an email that his client and the school were “focusing on future partnerships.”

May 23, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 379

IRS Logo 2IRS Update on the Proposed New Regulation on 501(c)(4) Organizations:

Last November, Treasury and the IRS proposed a new regulation governing political activity of section 501(c)(4) organizations. The proposal generated over 150,000 written comments — the most comments ever received by Treasury and IRS on a proposed tax regulation. Consistent with our standard rulemaking process, we intend to review those comments carefully, take into account public feedback, and consider any necessary changes. Consistent with what Commissioner Koskinen has previously stated, it is likely that we will make some changes to the proposed regulation in light of the comments we have received. Given the diversity of views expressed and the volume of substantive input, we have concluded that it would be more efficient and useful to hold a public hearing after we publish the revised proposed regulation. Treasury and the IRS remain committed to providing updated standards for tax-exemption that are fair, clear, and easier to administer.

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May 23, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, May 22, 2014

NLJ: Law Schools Paid $2 Million to Judges for Lectures, Teaching in 2012

National Law Journal, Paying For Prestige: Law Schools Paid Judges Nearly $2 Million for Teaching, Lecturing in 2012:

Law schools paid federal appeals judges anywhere from several thousand dollars for a lecture to nearly $278,000 for full-semester teaching in 2012 — at once buying prestige and giving students a direct line to some of the judiciary's top legal minds.

Senior Judge Douglas Ginsburg of the U.S. Court of Appeals for the D.C. Circuit was the top earner, receiving $277,906 from New York University School of Law, according to the most recent financial disclosure reports judges must file under federal law. NYU Law paid $190,528 to D.C. Circuit Senior Judge Harry Edwards.

Ginsburg and Edwards were among five senior judges who reported law school salaries of at least $100,000, according to the disclosures.

All told, these judges were among 57 active and senior appeals judges reporting income from U.S. law schools. The NLJ reviewed 257 financial reports released in late 2013 and this year. Together, the judges earned nearly $2 million for teaching and lecturing as they navigated a thicket of ethics rules that restrict activity off the bench. The latest reports covered information from 2012.

Top-ranked law schools — including Columbia Law School, Duke Law School, Harvard Law School, NYU Law and Yale Law School — brought the most judges to campus, according to income judges reported and travel reimbursements they disclosed for moot courts and other events.

Judges burnish a school's reputation among prospective students, donors and law school rankings voters. They bring real-world expertise to the classroom as students face growing pressure to enter the job market with practical skills. And, judges say, the extra income doesn't hurt.

TOP LAW SCHOOL EARNERS
NLJ 3

TOP PAYING LAW SCHOOLS
NLJ 4

May 22, 2014 in Legal Education | Permalink | Comments (0)

318,000 Federal Workers Owe $3.3 Billion in Back Taxes (Delinquency Rate Is 33% Higher Among VA Employees)

318,462 federal workers and retirees owed more than $3.3 billion in back income taxes as of September 30, 2013, a delinquency rate of 3.27% (compared to 8.7% for the entire U.S. population). See the full spreadsheet here.

Among the 18 executive departments, the embattled Department of Veterans Affairs has the second highest delinquency rate among its employees:  4.38% (behind the Department of Housing and Urban Development's 5.29%).

Among 27 large (> 1,000 employees) independent agencies, the Federal Reserve has the third highest delinquency rate:  6.51%.

The delinquency rate is 4.87% in the House of Representatives and 2.43% in the Senate.

In the tax world, the delinquency rate is 3.02 in the Tax Court and 1.20% in the Treasury Department (the IRS is not separately broken out).

For prior years data, see:

May 22, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

District Court Dismisses Atheists' Challenge to Tax Benefits for Churches and Clergy

Christianity Today:  Good News for Churches Worried About Losing Their Pastor's Best Benefit to Atheist Lawsuits:

A federal judge in Kentucky has thrown out an atheist challenge to tax benefits for churches and clergy—a decision that stnds in opposition to the high-profile overturning of the IRS's clergy housing allowance by a Wisconsin federal judge in November.

Three groups—American Atheists, Atheists of Northern Indiana, and Atheist Archives of Kentucky—had argued that the current tax code provisions unfairly favor churches and pastors, reports the Evangelical Council for Financial Accountability (ECFA). According to ECFA, their suit objected to:

  • the church exemption from the requirement to file applications for recognition of tax-exempt status (Form 1023),
  • the church exemption from filing annual information returns (Form 990),
  • the clergy housing exclusion,
  • the exemption from income tax withholding and FICA taxes for ministers, and
  • the specific audit procedures for churches.

The plaintiffs relied heavily on a recent ruling by Wisconsin judge Barbara Crabb upholding the Freedom from Religion Foundation's (FFRF) claim that the clergy housing allowance is unconstitutional. (CT's sister pub, Church Law and Tax, offers 10 takeaways.] The Wisconsin ruling is on hold while the case is appealed to the Seventh Circuit, and would only affect pastors in Wisconsin, Illinois, and Indiana if upheld.

But Kentucky judge William O. Bertelsman said the Wisconsin case was inapplicable, because it was brought by two FFRF leaders who said they could not receive tax-exempt housing because they weren't practicing clergy. In Kentucky, however, there were "no named individual plaintiffs" and also no "employees that receive a housing allowance" that they are suing on behalf of.

"The FFRF decision is narrow," challenging only the clergy housing exemption, Bertelsman wrote.

May 22, 2014 in Tax | Permalink | Comments (0)

Rosenbloom, Noked & Helal: A Proposal for an International Tax Cooperation Forum

Florida Tax ReviewH. David Rosenbloom (NYU), Noam Noked (Harvard) & Mohamed S. Helal (Harvard), The Unruly World of Tax: A Proposal for an International Tax Cooperation Forum, 15 Fla. Tax Rev. 57 (2014):

International cooperation in tax policy is deeply fractured. Inconsistencies, loopholes and ineffective mechanisms—that could be avoided if efficient collaboration between countries existed—have created significant inefficiency losses for decades. This paper focuses on the institutional infrastructure underlying international cooperation in tax issues and argues that the current forums in which international cooperation in tax issues occurs do not provide an adequate platform in which countries with similar interests can effectively promote collaborative effort. To facilitate cooperation, this paper puts forward a proposal to create a new institution that is currently missing from the international tax policy-setting arena: an informal forum for coordination between countries that share similar interests in tax policy, inspired by the model of “Like Minded Groups” in international organizations. This forum will enable countries that share similar interests to cooperate and reach understandings about necessary policy changes. We mention two major projects that this forum could promote—efforts to curtail tax evasion and efforts to harmonize different aspects of tax policy. We argue that this model might have significant advantages in promoting cooperation, reducing the “competitiveness” threat, pushing forward policies and overcoming external and domestic pressures. Due to the current challenges in the field of tax policy, and the difficulties in forming cooperation within the current institutional framework, the proposed model is worth serious discussion and consideration.

May 22, 2014 in Scholarship, Tax | Permalink | Comments (0)

Buckles: Obedience Norms and the Overseers of Charities

Johnny Rex Buckles (Houston), How Deep Are the Springs of Obedience Norms that Bind the Overseers of  Charities?, 62 Cath. U. L. Rev. 913 (2013):

This Article explores whether and how the exercise of discretion by charity fiduciaries in recasting a charity’s direction is, and should be, limited. Analyzing this basic issue raises additional, difficult inquiries: If the law does limit the ability of charity fiduciaries to determine the charitable paths of their entities, what standards govern the exercise of fiduciary discretion? To what extent does , and should, the law treat fiduciaries of charitable trusts dissimilarly from those who govern charitable nonprofit corporations? What role should governmental actors play in monitoring these decisions by charity managers? If governmental actors should assume some monitoring role, should their review of fiduciary decisions be ex ante or ex post? Which governmental actors should be involved? Can donors and other stakeholders sufficiently protect their interests absent a strong supervisory role by the government? ...

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May 22, 2014 in Scholarship, Tax | Permalink | Comments (0)

The Most Overrated and Underrated Law Schools: U.S. News v. SSRN

US News SSRNIn Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black (Northwestern) and I compared the ranking of law schools using U.S. News and SSRN downloads.  In three prior posts, I  updated the chart on pages 98-102, showing the ranking of law schools under U.S. News (overall and peer reputation) and SSRN (recent and all-time downloads).

On page 124 of the article, we listed the most "undervalued" and "overvalued" law schools, based on the spread between their U.S. News peer reputation and SSRN all-time downloads. In three prior posts, I listed the most "undervalued" and "overvalued" law schools by U.S. News quartile.  Here are the 50 most "undervalued" and "overvalued" law schools:

Schools Undervalued by US News

Schools Overvalued by US News

School

US News

SSRN

Spread

School

US News

SSRN

Spread

T. Jefferson

181

73

-108

Baylor

76

203

+127

Suffolk

116

29

-87

CUNY

116

211

+95

Chapman

139

63

-76

Howard

99

191

+92

NY Law School

128

53

-75

Oregon

53

141

+88

St Thomas(MN)

139

65

-74

Oklahoma

67

154

+87

Widener

139

67

-72

Arkansas (LR)

99

183

+84

Baltimore

116

50

-66

Tulane

43

125

+82

Pace

128

70

-58

Nebraska

67

149

+82

J. Marshall (IL)

152

104

-48

Montana

116

196

+80

Seton Hall

87

42

-45

Gonzaga

99

174

+75

Drake

128

83

-45

St. Mary's

158

223

+65

South Texas

152

107

-45

Richmond

67

129

+62

Touro

158

115

-43

Wyoming

116

177

+61

Florida Int’l

152

111

-41

Hawaii

76

135

+59

UMKC

99

58

-41

Arkansas (FAY)

87

145

+58

William Mitchell

139

99

-40

Kentucky

67

124

+57

Michigan State

87

49

-38

N. Carolina Cent.

168

224

+56

George Mason

53

16

-37

West Virginia

109

163

+54

Ohio Northern

168

134

-34

SMU

53

106

+53

San Diego

53

21

-32

Maine

99

152

+53

Tennessee

59

28

-31

Wake Forest

35

87

+52

Penn State

76

46

-30

Duquesne

139

190

+51

Valparaiso

152

122

-30

Catholic

87

137

+50

San Francisco

109

81

-28

South Dakota

139

187

+48

Temple

53

26

-27

Connecticut

49

96

+47

American

49

23

-26

North Dakota

128

175

+47

Albany

116

91

-25

William & Mary

28

74

+46

Florida Coastal

186

161

-25

South Carolina

87

132

+45

Loyola (CA)

59

35

-24

Appalachian

181

226

+45

Texas Tech

116

92

-24

UC-Hastings

35

79

+44

Hamline

139

116

-23

Georgia State

67

110

+43

Southwestern

128

105

-23

Kansas

59

102

+43

St Thomas (FL)

173

150

-23

Wisconsin

26

68

+42

Illinois

35

13

-22

Tulsa

116

158

+42

Case Western

59

38

-21

Rutgers-Newark

76

118

+42

G. Washington

22

2

-20

LSU

99

140

+41

Rutgers-Cam.

76

56

-20

Mississippi Col.

158

199

+41

Regent

186

166

-20

Detroit

173

213

+40

N. Kentucky

158

139

-19

BYU

46

85

+39

Cardozo

49

31

-18

New Mexico

76

115

+39

Samford

139

121

-18

Northeastern

87

126

+39

Santa Clara

76

60

-16

Loyola (LA)

109

147

+38

New Hampshire

128

114

-14

Alabama

35

72

+37

Roger Williams

152

138

-14

Cincinnati

76

113

+37

New England

168

154

-14

Washington & Lee

28

64

+36

Brooklyn

67

54

-13

Washington (WA)

35

66

+31

Hofstra

99

86

-13

Quinnipiac

128

159

+31

Seattle

87

76

-11

Faulkner

181

209

+28

Washburn

128

117

-11

Mercer

116

143

+27

S. Illinois

139

128

-11

Campbell

168

195

+27

Louisville

99

89

-10

Georgia

35

61

+26

 

 

 

 

North Carolina

19

45

+26

 

 

 

 

Idaho

116

142

+26

May 22, 2014 in Law School Rankings, Legal Education | Permalink | Comments (8)

Aprill: Nonprofits and Political Activity: Lessons from England and Canada

TaxSymposiumHeaderEllen P. Aprill (Loyola-L.A.), Nonprofits and Political Activity: Lessons from England and Canada, 142 Tax Notes 1114 (Mar. 10, 2014) (Symposium on Tax Reform in a Time of Crisis):

In the recent debate about nonprofit organizations and political activity, little attention has been paid to what we can learn from the approach of other countries. This piece compares U.S. rules with those of Canada and England, in the context of both their nonprofit rules applicable to political activity and their campaign finance laws. As the piece explains, England and Canada, like the U.S., prohibit direct or indirect campaign intervention by charities. These countries, however, differ from the U.S. and each other in the amount of lobbying and other non-campaign political engagement permitted by charities. England and Canada do not limit noncharitable nonprofits from engaging in any type of political activity under their nonprofit or tax laws. Both countries, however, regulate elections and campaign finance in general more stringently than does the U.S.

May 22, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (1)

Rostain & Regan: Lawyers, Accountants, and the Tax Shelter Crisis

ConfidenceTanina Rostain (Georgetown) & Milton C. Regan Jr. (Georgetown), Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014):

For ten boom-powered years at the turn of the twenty-first century, some of America’s most prominent law and accounting firms created and marketed products that enabled the very rich—including newly minted dot-com millionaires—to avoid paying their fair share of taxes by claiming benefits not recognized by law. These abusive domestic tax shelters bore such exotic names as BOSS, BLIPS, and COBRA and were developed by such prestigious firms as KPMG and Ernst & Young. They brought in hundreds of millions of dollars in fees from clients and bilked the U.S. Treasury of billions in revenues before the IRS and Justice Department stepped in with civil penalties and criminal prosecutions. In Confidence Games, Tanina Rostain and Milton Regan describe the rise and fall of the tax shelter industry during this period, offering a riveting account of the most serious episode of professional misconduct in the history of the American bar.

Rostain and Regan describe a beleaguered IRS preoccupied by attacks from antitax and antigovernment politicians; heightened competition for professional services; the relaxation of tax practitioner norms against aggressive advice; and the creation of complex financial instruments that made abusive shelters harder to detect. By 2004, the tax shelter boom was over, leaving failed firms, disgraced professionals, and prison sentences in its wake. Rostain and Regan’s cautionary tale remains highly relevant today, as lawyers and accountants continue to face intense competitive pressure and regulators still struggle to keep pace with accelerating financial risk and innovation.

May 22, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Muller: Winner and Losers From the End of Flagging LSAT Scores of Disabled Students

Following up on yesterday's post, DOJ Enters $7.7 Million Consent Decree to Settle ADA Lawsuit Against LSAC Over ADA Accommodation in Administration of LSAT:  Derek Muller (Pepperdine), LSAC Accommodated LSAT Flagging Settlement Will Affect Some Negatively:

LSACTheoretically, the practice of "flagging" accommodated scores caused a stigma. The worry was that law school admissions committees would view such flags negatively and make them less inclined to admit accommodated students.

But there was a benefit to this regime, too--at least to some. Accommodated students would not have their LSAT scores reported to the ABA, or, more importantly for law school admissions committees' sakes, U.S. News & World Report in the school's median scores. The ABA has explained that LSAC has no data demonstrating that accommodated LSAT scores have the same meaning as non-accommodated scores, so it excludes them from its totals. ...

Under the old regime, an accommodated test-taker with a 168 LSAT and a 3.0 GPA would be disadvantaged. Her file would indicate that she was an accommodated test-taker, and, despite her high LSAT score and sound index score, an admissions committee concerned about its medians would be less inclined to admit her. That's because her LSAT score would not be included in the USNWR medians. But, under the post-consent decree regime, the admissions committee would have no idea that she was accommodated, and it would be more inclined to admit her (if worried about its medians).

In contrast, under the old regime, an accommodated test-taker with a 153 LSAT and a 3.9 GPA would be advantaged. His file would indicate that he was an accommodated test-taker, and, despite his low LSAT score, an admissions committee concerned about its medians would be more inclined to admit him. That's because his LSAT score would not be included in the USNWR medians. But, under the post-consent decree regime, the admissions committee would have no idea that he was accommodated, and it would be less inclined to admit him.

The benefits, then, will redound to accommodated test-takers who score well on the LSAT. But accommodated test-takers who perform poorly on the LSAT will, in all likelihood, perform worse.

May 22, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 378

Wednesday, May 21, 2014

More on Justice Scalia's Critique of Legal Education

ScaliaFollowing up on Saturday's post, Justice Scalia Rejects 2-Year Law School, Skills Training; Calls for Cutting Tuition and Faculty Salaries, Increasing Faculty Teaching Loads:

May 21, 2014 in Legal Education | Permalink | Comments (2)

Silver: Globalization and the Monopoly of ABA-Approved Law Schools

Carole Silver (Northwestern), Globalization and the Monopoly of ABA-Approved Law Schools: Missed Opportunities or Dodged Bullets?, 82 Fordham L. Rev. 2869 (2014):

As the market for lawyers and for law itself has responded to global forces, legal education also is becoming accustomed to working within a global context. U.S. law schools routinely look beyond the country’s borders to attract new students and opportunities. As with law firms and business generally, it no longer is sufficient to be domestic only; in order to gain prestige and to effectively compete in the U.S. market, schools must have a credible claim to being globally connected, if not global themselves. But despite the reorientation of law schools toward globalization, the regulatory regime in which U.S. law schools operate has not made a parallel shift toward embracing a global framework. Rather, it continues to maintain a distinctly U.S.-centric approach. The article offers a case study of globalization’s role in the fragmentation of power, and explores the resulting tensions.

May 21, 2014 in Legal Education, Scholarship | Permalink | Comments (0)

Harvard Symposium: Class in America

JOLSymposium, Class in America, 51 Harv. J. on Legis. 89-170 (2014):

May 21, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (1)

Davis: Taxing Modern Families

Tessa Davis (Tulane), Taxing Modern Families Part I: Mapping the Families of Tax:

The Tax Code contains not one, but two conceptions of family. Existing scholarship does not address this puzzle but instead takes one of two views on the family — either the family is a tool for avoiding taxes or it is a source of discrimination. Current scholars, motivated by the discrimination concern, reject the relevance of kinship to tax and argue for an increasing focus on the individual. This Article takes a different approach. Utilizing the status/contract distinction familiar to family law scholars, it explains the puzzle of the multiple families in the Code, identifying the two families of the Code and their respective functions. Specifically, this Article shows that when we convey benefits through the Code we understand family as broad and contract-based. On the other hand, when our goal is to root out or head off tax gaming and avoidance, we constrict our notion of family to that of the nuclear, status-based family. Current reform proposals undervalue the importance of family to the prevention of avoidance and evasion, make targeting beneficial provisions more difficult, and inhibit the challenging work of reforming the Code to be both administratively feasible and non-discriminatory. Contrary to the current scholarship, this Article argues we should neither cut kinship from the Code nor rely exclusively upon the contract family. Instead, this Article creates a framework for modernizing the tax treatment of the family that utilizes kinship and both the status and contract families to maintain fairness and administrability, testing that framework on the § 32 Earned Income Tax Credit.

May 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

Schumacher: Magnifying Tax Deterrence by Prosecuting Professionals

Scott A. Schumacher (University of Washington), Magnifying Deterrence by Prosecuting Professionals, 89 Ind. L.J. 511 (2014):

This article examines the recent series of criminal prosecutions against tax professionals and offshore bankers. These criminal cases, brought against the largest Swiss bank (UBS), the oldest Swiss bank (Wegelin), one of the largest accounting firms in the world (KPMG), as well as numerous lawyers and accountants, was a dramatic shift for the U.S. Department of Justice. After decades of tolerating abusive tax shelters and tax haven banks, the Government changed its policy. However, rather than indicting the individuals and corporations who invested in tax shelters or hid money in offshore accounts, the Justice Department indicted the lawyers, accountants, and bankers who advised them. This article will analyze those prosecutions from a theoretical, historical, and practical perspective, and will examine the impact the new prosecution policy will have on the legal professional, the tax system, and international relations.

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May 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

Law School Rankings: U.S. News (3rd & 4th Quartile) v. SSRN

US News SSRNIn Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black (Northwestern) and I compared the ranking of law schools using U.S. News and SSRN downloads.  In prior posts, I  updated the chart on pages 98-102, showing the ranking of law schools under U.S. News (overall and peer reputation) and SSRN (recent and all-time downloads) of the Top 99 law schools (according to the U.S. News overall ranking).  Here is the chart for law schools ranked 100-194):

School

US News Overall

US News Peer

SSRN Recent

SSRN All-Time

Oregon

100

53

143

141

Hawaii

100

76

123

135

SUNY-Buffalo

100

87

72

90

Florida International

100

152

105

111

Mississippi

104

99

126

123

UMKC

104

99

53

58

Mercer

104

116

156

143

Santa Clara

107

76

50

60

Catholic

107

87

148

137

Syracuse

107

87

118

95

Gonzaga

107

99

162

174

St. John's

107

99

91

93

Texas Tech

107

116

74

92

CUNY

113

116

261

211

Drake

113

128

95

83

Cleveland State

115

128

122

120

Creighton

115

128

92

119

Washburn

115

128

124

117

Albany

118

116

87

91

Idaho

118

116

140

142

Quinnipiac

118

128

164

159

DePaul

121

87

86

98

Arkansas-Little Rock

121

99

166

183

Montana

121

116

170

196

Willamette

121

116

110

108

Duquesne

121

139

190

190

Hamline

121

139

94

116

Akron

121

139

129

133

Campbell

121

168

203

195

Maine

129

99

154

152

Vermont

129

109

88

109

Drexel

129

116

146

131

Wyoming

129

116

188

177

North Dakota

129

128

185

175

St. Thomas (MN)

129

139

61

65

Hofstra

135

99

102

86

Howard

135

99

197

191

Baltimore

135

116

44

50

Samford

135

139

97

121

William Mitchell

135

139

116

99

NY Law School

140

128

78

53

Pace

140

128

81

70

Chapman

140

139

101

63

Memphis

140

139

153

155

Toledo

140

139

130

130

South Dakota

145

139

194

187

South Texas

146

152

96

107

McGeorge

147

128

155

136

Loyola-New Orleans

Tier 2

109

136

147

San Francisco

Tier 2

109

70

81

Suffolk

Tier 2

116

26

29

Southwestern

Tier 2

128

107

105

Southern Illinois

Tier 2

139

117

128

Dayton

Tier 2

139

167

156

Widener

Tier 2

139

75

67

J. Marshall (Chicago)

Tier 2

152

113

104

Roger Williams

Tier 2

152

133

138

Texas A&M

Tier 2

152

131

146

Valparaiso

Tier 2

152

120

122

California Western

Tier 2

158

181

168

Elon

Tier 2

158

171

169

Golden Gate

Tier 2

158

174

172

Mississippi College

Tier 2

158

195

199

Northern Illinois

Tier 2

158

169

178

Northern Kentucky

Tier 2

158

158

139

Nova Southeastern

Tier 2

158

193

162

Oklahoma City

Tier 2

158

152

160

St. Mary's

Tier 2

158

218

223

Touro

Tier 2

158

119

115

Capital

Tier 2

168

183

188

New England

Tier 2

168

150

154

N. Carolina Central

Tier 2

168

230

224

Ohio Northern

Tier 2

168

137

134

J. Marshall (Atlanta)

Tier 2

173

168

173

Southern Illinois

Tier 2

173

117

128

St. Thomas (FL)

Tier 2

173

147

150

Texas Southern

Tier 2

173

163

167

Detroit

Tier 2

173

214

213

District of Columbia

Tier 2

173

179

192

W. New England

Tier 2

173

145

164

Whittier

Tier 2

173

176

179

Appalachian

Tier 2

181

224

226

Charleston

Tier 2

181

191

197

Faulkner

Tier 2

181

219

209

Florida A&M

Tier 2

181

198

201

Thomas Jefferson

Tier 2

181

85

73

Arizona Summit

Tier 2

186

186

182

Barry

Tier 2

186

178

194

Charlotte

Tier 2

186

200

185

Florida Coastal

Tier 2

186

175

161

Liberty

Tier 2

186

202

210

Regent

Tier 2

186

141

166

Thomas M. Cooley

Tier 2

186

172

181

Western State

Tier 2

186

177

198

Ave Maria

Tier 2

194

173

189

On page 124 of the article, we listed the most "undervalued" and "overvalued" law schools, based on the spread between their U.S. News peer reputation and SSRN all-time downloads. Here are the updated figures for the law schools ranked 99-194:

Schools Undervalued by US News

Schools Overvalued by US News

School

US News

SSRN

Spread

School

US News

SSRN

Spread

T. Jefferson

181

73

-108

CUNY

116

211

+95

Suffolk

116

29

-87

Howard

99

191

+92

Chapman

139

63

-76

Oregon

53

141

+88

NY Law School

128

53

-75

Arkansas-LR

99

183

+84

St Thomas (MN)

139

65

-74

Montana

116

196

+80

Widener

139

67

-72

Gonzaga

99

174

+75

Baltimore

116

50

-66

St. Mary's

158

223

+65

Pace

128

70

-58

Wyoming

116

177

+61

J. Marshall (IL)

152

104

-48

Hawaii

76

135

+59

Drake

128

83

-45

N. Carolina Cent.

168

224

+56

South Texas

152

107

-45

Maine

99

152

+53

S. Illinois

173

128

-45

Duquesne

139

190

+51

Touro

158

115

-43

Catholic

87

137

+50

Florida Int’l

152

111

-41

South Dakota

139

187

+48

UMKC

99

58

-41

North Dakota

128

175

+47

William Mitchell

139

99

-40

Appalachian

181

226

+45

Ohio Northern

168

134

-34

Mississippi Col.

158

199

+41

Valparaiso

152

122

-30

Detroit

173

213

+40

San Francisco

109

81

-28

Loyola (NO)

109

147

+38

Albany

116

91

-25

Quinnipiac

128

159

+31

Florida Coastal

186

161

-25

Faulkner

181

209

+28

Texas Tech

116

92

-24

Mercer

116

143

+27

Hamline

139

116

-23

Campbell

168

195

+27

Southwestern

128

105

-23

Idaho

116

142

+26

St. Thomas (FL)

173

150

-23

Mississippi

99

123

+24

Regent

186

166

-20

Liberty

186

210

+24

May 21, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Monahan Presents The Law and Politics of Public Pensions Today at ALI Annual Meeting

ALIAmy B. Monahan (Minnesota), co-recipient of the American Law Institute's 2013 Young Scholars Medal for "early-career law professors whose work is relevant to the real world and has the potential to influence improvements in the law," will present The Law and Politics of Public Pensions at ALI's 2014 Annual Meeting today in Washington, D.C. She will be introduced by Goodwin Liu, California Supreme Court Justice and Chair of our Young Scholars Medal Committee.

(Hat Tip: Francine Lipman.)

May 21, 2014 in Conferences, Legal Education, Scholarship, Tax | Permalink | Comments (0)

AALS Call for Papers: IRS Oversight of Tax-Exempt Organizations

AALS 2014The AALS Section on Nonprofit and Philanthropy Law and the AALS Section on Taxation (Co-Sponsor) have issued a Call for Paper Proposals for a 2015 Annual Meeting Section Panel on IRS Oversight of Charitable and Other Exempt Organizations – Broken? Fixable?:

Proposed papers might address: the role of the IRS in overseeing specific aspects of tax-exempt nonprofit organizations, such as political activity or governance; the relative strengths and weaknesses of IRS oversight compared to oversight by other actors, including state attorneys general and private, self-regulating bodies; the effect of the late-1990s reorganization of the IRS on its ability to oversee tax-exempt nonprofit organizations; or the overlapping jurisdictions of the IRS with other federal agencies that oversee aspects of nonprofit organizations, such as the Federal Election Commission, the Federal Trade Commission, and the Department of Education.

Panelists will be a mix of presenters chosen through this call for paper proposals and solicited panelists with relevant expertise. Presenters will have the opportunity to publish their papers in the faculty-edited Pittsburgh Tax Review. To facilitate such publication, panelists will be expected to have a completed draft by the January 3, 2015 panel presentation and a final draft by February 28, 2015. 

To submit your proposal, please email a short description (no more than 750 words) of your paper to Lloyd Hitoshi Mayer, Chair of the Section on Nonprofit and Philanthropy Law, and Miranda Fleischer, Chair of the Section on Taxation. The deadline for proposals is Friday, August 15, 2014. The Executive Committees of the sponsoring sections will select the papers to be presented by mid-September. Please be aware that pursuant to AALS rules, only full-time faculty members of AALS members law schools are eligible to submit a paper proposal in response to a section’s call for papers. However, fellows from AALS member law schools are also eligible to submit a paper proposal if they include a CV with their proposal. Faculty at fee-paid law schools, international, visiting, and adjunct faculty members, graduate students, and non-law school faculty are not eligible to submit.

May 21, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

DOJ Enters $7.7 Million Consent Decree to Settle ADA Lawsuit Against LSAC Over ADA Accommodation in Administration of LSAT

U.S. Department of Justice Press Release, Law School Admission Council Agrees to Systemic Reforms and $7.73 Million Payment to Settle Justice Department’s Nationwide Disability Discrimination Lawsuit:

LSACThe Justice Department filed a joint motion today for entry of a landmark consent decree to resolve allegations that the Law School Admission Council (LSAC) engaged in widespread and systemic discrimination in violation of the Americans with Disabilities Act (ADA).  Under the proposed consent decree, LSAC will pay $7.73 million in penalties and damages to compensate over 6,000 individuals nationwide who applied for testing accommodations on the Law School Admission Test (LSAT) over the past five years.  The decree also requires comprehensive reforms to LSAC’s policies and ends its practice of “flagging,” or annotating, LSAT score reports for test takers with disabilities who receive extended time as an accommodation.  These reforms will impact tens of thousands of test takers with disabilities for years to come. 

The United States intervened in DFEH v. LSAC Inc., which was originally brought on behalf of California test takers in the U.S. District Court for the Northern District of California.  The United States’ intervention expanded the case to ensure comprehensive and nationwide relief under Title III of the ADA for individuals with disabilities who request testing accommodations for the LSAT – a required examination for anyone seeking admission to an American Bar Association approved law school in the United States.  The allegations in the complaint detail LSAC’s routine denial of testing accommodation requests, even in cases where applicants have a permanent physical disability or submitted thorough supporting documentation from qualified professionals and demonstrated a history of testing accommodations since childhood.  Without the necessary accommodations, test takers with disabilities are denied an equal opportunity to demonstrate their aptitude and achievement level.  The lawsuit further alleged that LSAC engages in discrimination prohibited by the ADA through its practice of flagging the LSAT score reports of individuals who received extended time as a testing accommodation, thereby identifying to law schools that the test taker is a person with a disability.

May 21, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 377

IRS Logo 2House Commitee on Oversight & Government Reform Press Release,  After DOJ Dodges Questions, Issa Subpoenas Justice Department for IRS Investigation Targeting Documents:

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., today subpoenaed the Justice Department for documents after Richard Pilger, Director of the Department’s Election Crimes Branch, refused to answer critical questions on the instructions of Justice Department counsel during a transcribed interview on May 6, 2014. The subpoena follows an April 23, 2014 letter from 17 Members of the Committee requesting materials concerning the Department’s involvement in efforts to scrutinize tax-exempt applicants after emails surfaced between Pilger and the Internal Revenue Service’s Lois G. Lerner where they discussed singling out and prosecuting tax-exempt applicants, at the urging of a Democratic Senator.  As the Federal Election Commission, the IRS and the Justice Department looked for ways to minimize the impact of the Supreme Court’s decision in Citizens United, a clear outline emerges of government agencies cracking down on constitutionally protected free speech.

In a letter accompanying the subpoena, Chairman Issa stated: “The Department’s refusal to allow Mr. Pilger to testify about matters highly relevant to the Committee’s investigation unnecessarily delays and frustrates the Committee’s Constitutional oversight obligations.  The Department’s obstruction in this regard, coupled with its failure to produce any relevant material to date, leads the Committee to conclude the Department is not seriously committed to cooperating with the Committee’s investigation on the Committee’s terms.”

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May 21, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, May 20, 2014

The Continuing Debate Over Thomas Piketty's Capital in the 21st Century

CapitalFollowing up on my previous posts on the new book by Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

Wall Street Journal op-ed:  Piketty's Numbers Don't Add Up, by Martin Feldstein (Harvard):

Thomas Piketty has recently attracted widespread attention for his claim that capitalism will now lead inexorably to an increasing inequality of income and wealth unless there are radical changes in taxation. Although his book ... has been praised by those who advocate income redistribution, his thesis rests on a false theory of how wealth evolves in a market economy, a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.

New York Times:  To Lift the Poor, You Can’t Avoid Taxing the Rich, by Jared Bernstein (Center on Budget and Policy Priorities):

[T]here are three reliable ways to help or “lift” the bottom: subsidies that increase the poor’s economic security today; investment in their future productivity; and targeted job opportunities at decent wages. ... All of the above — the expanded earned-income tax credit, universal preschool, job-creating infrastructure — will take more tax revenue, and much of that new revenue will need to come from those at the top of the wealth scale.

New York Times:  To Lift Up the Poor, Must We Soak the Rich?, by Ross Douthat:

For a three-idea argument, I suppose it’s appropriate to raise three objections. So here they are:

  1. I don’t think even Bernstein believes that it’s actually impossible to improve the situation of the poor without directly raising taxes on the rich.
  2. It’s possible to favor increasing redistribution along something like the lines Bernstein suggests — through an expanded earned income tax credit, for instance — while disagreeing that we need a higher top marginal rate or a Piketty-style wealth tax in order to do it.
  3. Before we talk about significantly expanding our investments in education, elementary and collegiate, how confident should we feel that our existing “investment” in the “future productivity” of the poorest Americans is reaping value-for-the-dollar rewards?

Foreign Affairs:  The Inequality Illusion: Why a Wealth Tax Won't Work, by Wojciech Kopczuk (Columbia) & Allison Schrager (Quartz):

[S]everal prominent economists are proposing an annual wealth tax, which would apply only to those with assets worth more than a set amount. But there’s limited evidence that wealth inequality has actually worsened in the United States in the last 30 years. And, even if it does eventually get worse, imposing a tax on wealth is a terrible way to promote equality. It actually benefits the super wealthy the most.

Democracy -- A Journal of Ideas:  The Inequality Puzzle, by Lawrence H. Summers (Harvard):

I have serious reservations about Piketty’s theorizing as a guide to understanding the evolution of American inequality. And, as even Piketty himself recognizes, his policy recommendations are unworldly—which could stand in the way of more feasible steps that could make a material difference for the middle class. ...

Piketty argues for an internationally enforced progressive wealth tax, where the rate of tax rises with the level of wealth. This idea has many problems, starting with the fact that it is unimaginable that it will be implemented any time soon. Even with political will, there are many problems of enforcement. How does one value a closely held business? Even if a closely held business could be accurately valued, will its owners be able to generate the liquidity necessary to pay the tax? Won’t each jurisdiction have a tendency to undervalue assets within it as a way of attracting investment? Will a wealth tax encourage unseemly consumption by the wealthy?

Bloomberg:  Taxing a Professor's Privilege, by Megan McArdle:

You’ll have to wait on my thoughts on the book until they’re a bit more fully formed. As I've been reading, though, I keep returning to a question I heard at an economics conference a couple of months back: If we did implement a wealth tax, should it tax tenure? ...

Why single out professors? you ask. Isn’t this just more academic-bashing? You’re quite right: We shouldn’t single out professors. Everyone with civil-service protections or similar employment guarantees should probably have that asset taxed.

(Hat Tip: Mike Talbert.)

May 20, 2014 in Book Club, Tax | Permalink | Comments (2)

Redding: Law School Reforms Will Harm Law Students and the Legal Profession

Richard E. Redding (Vice Chancellor, Chapman), The Legal Academy Under Erasure, 65 Cath. U. L. Rev. ___ (2015):

We hear much about the crisis in legal education: high tuition costs, steep declines in law school enrollment, and graduates unprepared for practice who cannot find jobs. Proposals to address the crisis appear to enjoy wide support and may be poised to dramatically change the landscape of legal education. Such reforms will harm law students and the legal profession, placing the legal academy “under erasure,” by: (1) reorienting it from an academically-grounded education towards vocational training, (2) requiring just two years of study for the J.D. degree, (3) allowing graduates of non-ABA accredited law schools to sit for the bar examination, thereby rendering accreditation a toothless mechanism for ensuring academic quality, and (4) gutting faculty scholarship.

Instead, we must make the value of legal education worth its cost by doing a better job of educating and training our students. Legal education is broken because it fails to prepare students for the demands of modern law practice, which is more complex and interdisciplinary than ever before. We need a three-year program that is more robust, one that teaches the core first-year subjects as well as applications of other disciplines (e.g., accounting, economics, psychology) to everyday law practice, exposes students to a reasonable range of specialty areas, and integrates skills training (e.g., client counseling, advocacy, drafting) throughout the curriculum. To accomplish these goals, we should adapt the medical school model to legal education. This would entail a curriculum that provides a comprehensive foundation in basic legal subjects and legally relevant other disciplines, culminating in a series of clinical rotations where the basic doctrinal and interdisciplinary knowledge is applied in practice. I also explain why we should not gut support for faculty scholarship in the hopes that doing so will cut costs and encourage professors to focus on teaching. Contrary to popular claims, engaged scholars are better teachers, and legal scholarship can contribute meaningfully and substantially (though often in ways not readily apparent) to law practice and legal reform efforts. Finally, I suggest that we address the employment problem and improve educational quality by having fewer but better law schools, producing fewer attorneys.

May 20, 2014 in Legal Education | Permalink | Comments (4)

Miller & Maine: The Fundamentals of Wealth Transfer Tax Planning

John A. Miller (Idaho) & Jeffrey A. Maine (Maine), The Fundamentals of Wealth Transfer Tax Planning: 2013 and Beyond, 2013 BYU L. Rev. 879:

On January 1, 2013 Congress avoided the tax part of the so called “fiscal cliff” when it passed the American Taxpayer Relief Act of 2012 (ATRA). Among its many impacts this law prevented the application of a number of sunset provisions that would have dramatically altered the operation of the federal wealth transfer taxes. Instead Congress made permanent two significant transfer tax provisions introduced as temporary measures in 2010: the indexed basic exclusion amount and the deceased spousal unused exclusion amount. The latter provisions are sometimes referred to as the portability rules. ATRA also introduced a new maximum transfer tax rate of 40%. In addition ATRA made permanent a deduction for state death taxes and prevented the return of the state death tax credit. Thus, the main transfer tax emphasis of the actions taken by Congress in ATRA was to stabilize the wealth transfer tax system in a fashion that eliminates or reduces its planning impact on most taxpayers while also permanently establishing a significant new planning tool for the wealthy, the deceased spousal unused exclusion (DSUE) amount.

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May 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

ABA Tax Section Publishes Spring 2014 Issue of News Quarterly

ABA News QuarterlyThe ABA Tax Section has published 33 News Quarterly No. 3 (Spring 2014):

May 20, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

Infanti: LGBT Families, Tax Nothings

Anthony C. Infanti (Pittsburg), LGBT Families, Tax Nothings, 17 J. Gender Race & Just. 35 (2014):

The federal tax laws have never been friendly territory for LGBT families. Before the enactment of the federal Defense of Marriage Act (DOMA), the federal tax laws turned a blind eye to the existence of LGBT families by tacitly embracing state law discrimination against same-sex couples. When it enacted DOMA in 1996, Congress ensured that it would be able to continue to turn a blind eye to LGBT families even if one or more states were to legally recognize families headed by same-sex couples. In a real sense, LGBT families have been, and continue to be, tax outlaws.

This overt discrimination has not, however, proven to be an insurmountable hurdle for enterprising LBGT families wishing to obtain (at least in some measure) the same tax treatment as “traditional” families. The federal income tax laws provide tax benefits to relationships of dependency in many (though not all) of the same circumstances in which they afford benefits to married different-sex couples. These relationships of dependency are typically between the taxpayer, in the role of parent or caregiver, and a child or other person who cannot care for himself/herself. Often, the only means for same-sex couples to avoid otherwise discriminatory and burdensome tax consequences is for one spouse to qualify as the “dependent” of the other.

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May 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Law School Rankings: U.S. News (2d Quartile) v. SSRN

US News SSRNIn Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black (Northwestern) and I compared the ranking of law schools using U.S. News and SSRN downloads.  Last week, I updated the chart on pages 98-102, showing the ranking of law schools under U.S. News (overall and peer reputation) and SSRN (recent and all-time downloads) of the Top 50 law schools (according to the U.S. News overall ranking).  Here is the chart for law schools ranked in the second quartile (51-99):

School

US News Overall

US News Peer

SSRN Recent

SSRN All-Time

Richmond

51

67

121

129

Baylor

51

76

206

203

Penn State

51

76

54

46

UC-Hastings

54

35

59

79

Connecticut

54

49

80

96

Pepperdine

54

59

69

75

Nebraska

54

67

138

149

Houston

58

59

62

62

Kentucky

58

67

135

124

Oklahoma

58

67

165

154

Temple

61

53

23

26

Miami

61

53

64

71

Arkansas-Fay.

61

87

139

145

Cardozo

64

49